Data#3 has completed the first phase of its Discovery Technology takeover, confirming it has acquired 42.5 per cent of the Wi-Fi analytics software vendor for $2.5 million.
The value is comprised of $1.5m to be funded in cash flow, and accompanied by the provision of another $1m in working capital to fund business development. Shareholder dividends will not be impacted.
The reseller initially revealed its intent to acquire Discovery on June 13, but was at that stage unable to disclose the percentage figure of the non-controlling share.
At the time, Data#3 managing director, John Grant, told ARN the agreement would lead to a controlling position by 2015, and subsequently full ownership by June 2017 at latest.
Today Data#3 announced to the ASX that the transaction includes the option to acquire a further 14.2 per cent on the same terms by June 30, 2015, and a further option to acquire the balance of the shares in the company at market price by June 30, 2017.
According to Grant, Data#3 is purchasing Discovery as it wants user-oriented software to accompany its capabilities in middleware software.
"Discovery is very different to what we did in the past," Grant said in June. "It relies on implementation of Wi-Fi infrastructure. Those investments are not small and the benefits Discovery can add to Wi-Fi infrastructure are substantial."
Discovery hit the market in 1997, providing software and technical support to SMB, corporate and government clients. The Frenchs Forest-headquartered company dived into analytics, location, and customer communication software in 2013 with the launched of Connected Customer-xperience (CCX).
This transaction is not Data#3's first taste of Discovery; the former became a reseller of CCX mid last year.
According to Data#3's ASX statement, that relationship will be maintained "on an arm's length basis" and managed separately from the investment "to ensure the integrity of Discovery's relationship with other resellers of the solution."
On the flipside, Data#3 gives Discovery the ability to get closer to networking vendor, Cisco Systems, both within and outside of Australia.
"Over the last two years we have made significant headway in developing and taking our Wi-Fi analytics solution to market, but this is a new venture for us," Discovery co-founder and shareholder, Brendan Williams, said.
"Having Data#3 as a strategic investor will strengthen the relationship we have with Cisco and provide us with the financial support, guidance and stewardship a typical start-up technology requires to deliver the outcomes we see are possible."